When the Actual Amount of a Material Used in Production

question 13

Multiple Choice

When the actual amount of a material used in production is greater than the standard amount allowed for the actual output, the journal entry would include:

• A) debit to Materials Inventory; credit to Materials Efficiency Variance.
• B) debit to Work-In-Process Inventory; credit to Materials Efficiency Variance.
• C) debit to Materials Inventory; debit to Materials Efficiency Variance.
• D) debit to Work-In-Process Inventory; debit to Materials Efficiency Variance.

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Definitions:

Contribution Format

A type of income statement that separates variable costs from fixed costs to calculate a company's contribution margin.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Variable Costing

A ledger maintaining technique that factors in only the variable costs incurred during production (direct materials, direct labor, and variable manufacturing overhead) into product pricing.

Absorption Costing

In this financial accounting strategy, the entirety of manufacturing expenses—encompassing direct materials, direct labor, and both variable and fixed overheads—are captured in the cost of a product.